PEER COMPANIES

My first wealth creation idea for today would be Dewan Housing Finance company. Dewan Housing Finance is a leading housing finance company with a focus on relatively smaller towns and cities where competition is less and the demand is robust. As far as this sector is concerned, I am extremely positive on the sector with the government’s focussed on housing through its various initiatives like 100 smart cities and housing for all by 2020. I see tremendous potential in the sector and within the sector, Dewan Housing came out with its results for December quarter. The results were pretty decent but we have seen huge correction in the stock from its highs of around Rs 285 to the current level of Rs 170 or Rs 180 which is presenting a very good opportunity for long-term investors to acquire this stock. As far as the valuations are concerned, if you compare it with its peers like an LIC Housing Finance or Indiabulls Housing Finance or a Repco Home Finance, this stock trades at a significant discount to its peers. It trades at just about 1.1 times its current year book value and PE of around six to seven times whereas its peers are trading at much higher multiples. So I am positive on the stock and from the current levels of around 180 we could see levels of Rs 300 on the stock in about a year.

Bullish on Hind Sanitaryware as government focusses on housing

My second pick would be Hindustan Sanitaryware. This company is the market leader in the Indian sanitaryware business with a dominant 40 per cent market share. The company has a pretty strong brand. It has a nationwide distribution network. The company has grown pretty impressively over the past few years and I think this growth would continue and this again is a play on the government’s focus on housing through its various initiatives which I just talked about and to add to that, if GST also gets implemented, that would be pretty positive for this company. And far as the quality of the financials are concerned, they are pretty good. It enjoys a pretty healthy balance sheet. The September quarter results were also good and the stock has also significantly corrected from its highs of around 475 to the current levels of 270 which is a correction of more than 44 per cent. So actually. this stock was being chased at a multiple of around 32-35 only a few months back. Now the price earnings multiple have come down to 17 which looks very-very attractive so I am bullish on the stock and I feel one should buy into this stock at the current level with a timeframe of 12 to 18 months when I expect the share price to touch Rs 400.

Disclaimer: This recommendation is analyst's own and does not represent those of economictimes.com & ETMarkets.com. Please consult your financial advisor before taking any position in the stock/s mentioned.